Les Miserables

Les Miserables

One thing we can say about our wine drinking friends in France is they sure know a thing or two about revolutions. According to reports coming out of the country that brings us great champagne, some truly excellent wines and one great Broadway musical the Board of Directors at Sanofi (NYSE:SNY) may be looking to replace CEO Chris Viehbacher. A published report in the French newspaper Les Echos states that board is unhappy with Mr. Viehbacher as he’s not “French” enough.

It seems that rumors have been circulating in the French media that the board will follow a well-known French tradition and it will be off with Mr. Viehbacher’s head. These rumors prompted Mr. Viehbacher to send a letter to the board, which was subsequently leaked to the media (surprise, surprise). The letter was published on the Les Echos web site and outlines the reasons why he should not be replaced as the company’s CEO.

Now Diabetic Investor must admit we are not an expert in French law and we understand even less about how French corporations are run but here in America we doubt any company would replace a CEO because they were not “American” enough. Especially when that CEO has done a pretty good job running the company when measured by how stakeholders have benefited. We suppose Mr. Viehbacher should be grateful that Sanofi is not based in the great city of Chicago as the way the board is acting it looks like he would learn the “Chicago Way” which come to think of it is the American version of “off with his head.”

Still when we reading letter we could not help but think it was just a little too self-serving and that he himself or a member of his inner circle leaked it to the media. In America we call this spin-control. Yes he outlines several solid reasons he should not be replaced but as a CEO of a major corporation he should know that this type of scrutiny comes with the job. He should also be well aware that pleasing stakeholders while important, he also answers to the Board of Directors. Finally he should know that solid past performance is no guarantee of future results.

Diabetic Investor has been overly harsh on Sanofi for how they have mismanaged their diabetes franchise. A franchise which is about to see their lead product, Lantus lose patent protection. This mismanagement includes a number of notable failures and a dubious partnership with MannKind (NASDAQ:MNKD).

It should also be noted that several Sanofi executives have decided to get ahead of the coming blood bath and have already jumping ship. Recently Anne Whitaker President of North America bolted from the company, a notable event given that Mr. Viehbacher brought her into the company. It’s ironic that in his letter Mr. Viehbacher states when speaking of the possible firing he states how such a move would “destabilize senior leaders, many of whom I have recruited”. Guess Ms. Whitaker and the others who’ve abandoned ship are taking destabilization into their own hands or as some might state when the ship is sinking the best swimmers jump first.

To be quite honest we see this leaked letter as severing two purposes for Mr. Viehbacher, one CYA and second “go ahead fire me I just want a better severance package.” Now if Mr. Viehbacher truly owned a set he would follow the path set by recently departed Alere CEO Ron Zwanziger who basically told the Alere board to take this cake and shove it where the sun doesn’t shine. Now Mr. Zwanziger after resigning from Alere is attempting to buy the company, take it private and then tell the board to take a very long walk on a very short pier. Talk about brass one’s.

The simple fact is the Sanofi Board has ample reasons to replace Mr. Viehbacher, although not being French enough is not among them. Yes he did a good job but recent events and missteps signal that it’s time to take the company in a different direction.  That it’s time to start holding the management teams that he brought in accountable. That having a strategy is one thing, executing on that strategy is quite another story. Yes returns to stakeholders are important but if these stakeholders want these results to continue sometimes that means changing CEOs.

To be quite honest Sanofi is showing all the signs that the company is ripe for change and not just with replacing the CEO. Listen Tom Brady, Aaron Rodgers and Payton Manning, all great quarterbacks, all future Hall of Famers will eventually be replaced. That the great basketball player Michael Jordan was not the same MJ late in his career as the MJ who won six NBA championships. Mr. Viehbacher is acting as if he’s still at the top of his game based solely on past performance, that recent missteps should be over-looked because at one time he was performing at the highest level.

In some respects he should be grateful that the Board is getting set to can him, sparing him the embarrassment of being replaced when the ship finally does sink. Better to get out with his legacy only slightly tainted than to see his reputation totally sink into the abyss. He’ll quickly find out there is life after Sanofi, and Sanofi will also find there is life without Mr. Viehbacher.  Let’s just hope whoever replaces him is French enough, whatever that means.